Sydney - the capital of Asia Pacific for hotel investment

Craig Collins

​Sydney is currently one of the most active hotel investment markets globally with some AUD 1.9 billion of major CBD hotel sales taking place in the past 22 months.

This level of transaction volume has been driven by a number of high profile deals including the 531-room Four Seasons Sydney selling to Mirae out of Korea in August 2013 for $340 million. This was shortly followed by the sale of the 436-room Sofitel Sydney Wentworth for just over $200 million to Frasers Centrepoint from Singapore in June 2014. The 557-room Sheraton on the Park was next which completed in November 2014 for $463 million to China based Sunshine Insurance Group. The 579-room Hilton Sydney exchanged a couple of weeks ago to a group associated with Singapore based Bright Ruby for $442 million and now The Westin Sydney and Heritage Retail is under contract.

All of these major transactions have been finalised by JLL Hotels & Hospitality Group, with The Westin Hotel Sydney and Heritage Retail transaction being negotiated by Craig Collins, Chief Executive Officer - Australasia, and Peter Harper, Senior Vice President – Investment Sales.

Craig Collins said, "The Westin Sydney transaction reaffirms the strong demand for Australian CBD trophy hotel assets. As one of Sydney's most prestigious luxury hotels it was strongly contested by parties from Singapore, Hong Kong, China, US and Korea."

He added "When meeting hotel investors around the world, buyers now include Sydney in the discussion of key global hotel markets they wish to invest in along with London, New York, Tokyo and Paris.

"Every large five-star hotel in Sydney is now owned by a foreign group, mainly from Asia. Asian investors love Australian Hotels."

With very limited supply coming into the Sydney market, the trading fundamentals are exceptional. "Over many weeks of the year it is often difficult to book a five-star hotel room in Sydney between Monday and Thursday. There are no rooms available and the ripple effect this is having across three and four star assets is significant. Sydney is having a golden run and I can't see this slowing down anytime soon." said Mr Collins.

In 2013 there was approximately AUD 2.1 billion of hotel transactions undertaken across Australia. This grew to a 15 year record of circa AUD 2.7 billion in 2014, representing 30% of transaction volume in Asia Pacific. However, for the first five months of 2015 we have already gone over AUD 1.9 billion.

"A new record of sales volume for Australian hotels could absolutely be broken in 2015, potentially making Australia the strongest hotel investment destination across Asia Pacific, ahead of the traditionally sought markets of Singapore, Thailand and Malaysia" said Mr Collins.

Furthermore, the demand experienced across the trading markets is also being felt across the wider investment market.

Given the unprecedented competition for hotel investment opportunities in the CBD, some investors have decided to change their focus towards the metropolitan and regional markets in an effort to secure acquisitions.

We've seen a high volume of hotel transactions take place in sub-markets that have historically been less liquid. Markets such as the Airport precinct, Western Sydney, Wollongong and Newcastle are highly sought at present.